Compare: Cash Back Vs. Flexible Points Vs. Loyalty Program Miles & Points Credit Cards


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Compare: Cash Back Vs. Flexible Points Vs. Loyalty Program Miles & Points Credit Cards

If you have not gone through the Beginner's Guide to Miles & Points yet, I urge you to read that first as it provides an overview of the miles and points on travel. In the article, I mentioned that getting the bonus points through credit card is the fastest way to earn enough points for travel. If you are serious about getting into the miles and points hobby. Then it is very essential for you to understand the differences between the three rewards earning credit cards: Cash Back, Flexible Points, and Loyalty Program Miles & Points Credit Cards.

Cash Back Earning Credit Card
As the name suggests, whenever you use an eligible credit card to spend, you receiver cash back in return. The credit card company accrue those rewards automatically for you and credit them into your account. When you have enough reward, you can either call in or go online to redeem those rewards by applying the "credits" toward your balance. So you are receiving "cash back" on purchases that you made with that credit card.

For example, in January month you made a total purchase of $1,000 on the cash back earning credit card. That card earns you 1% cash back on every $1 spend. So you earn $10 cash back and you can use that $10 to pay your $1,000 balances. In the end you only owe $90.

Each credit card issuers have different % cash back earning and redeeming offers. The above example is only used to illustrate how cash back credit card works. 

Flexible Points Earning Credit Card
Every time you spend on this type of credit card, you receive points in return. The earning structure varies from one card to another, and from one credit card issuer to another. You earn those points and then you can use those points to redeem as cash/credit back to your balances. This type of redemption is exactly the same as the above mentioned cash back rewards.

Similarly, you can also use those points to redeem for travel through the credit card's portal. This basically means that you can use your points in lieu of money to pay for a flight ticket or a hotel room, but you must book on the credit card's travel site. Depending on the kind of credit card you have, credit card company rewards you with this type of redemption by making your points worth more than just 1 cent per $1 when you use points to purchase travel though them. This is why this is a better redemption than the cash back redemption as your points will worth more.

For example, let's say you have accrued 10,000 points on a flexible points earning credit card, and 1 point is worth 1 cent, set by the credit card company for any cash back redemption. So you have $100 credit (1 cent per point). The credit card company also states that if you use your points to redeem for travel with them, your points are worth 25% more. Therefore, your 10,000 points are now worth $125 cash (1.25 cents per point). Follow me so far?

There's a flight ticket you want to purchase for $100. You have two options here:
  1. You purchase the flight ticket with a travel agent or airline directly for $100. After that, you can apply the $100 credit to the balance and you owe nothing. Your 10,000 points are gone.
  2. Or, you can purchase the same flight ticket via the credit card's travel website. Your points are now worth 25% more. So in the end, you only use 8,000 points to purchase the same exact ticket, and still have 2,000 points left in your account. 

Another valuable redemption with flexible points is the ability to transfer those points to loyalty programs industry such as United, Delta, Alaska, Marriott, Hyatt, Hilton, etc. This is one of my favorite use of points for travel. Your points can go so much farther with this type of redemption. Here are a few scenarios when this makes sense:
  • A round-trip economy ticket from US to Japan can cost around $1,000. But if you have 70,000 points and transfer to United for 70,000 miles, that's enough for that ticket. 
  • A Marriott's room during Super Bowl can cost $800 or more. You can transfer those points to Marriott's rewards program and book using points instead because points booking is based on the category of the hotel, not the event. 
  • First Class ticket can cost above $10,000 or more. Transferring points to miles to book for that ticket is an awesome redemption. I warn you though, once you sit in one of those first class seats, it may be harder for you go back to economy seats. 
  • 4-5 stars hotels and resorts are another good examples when the rate is outrageously expensive, but you can enjoy them by using hotel points too book instead. 

Loyalty Program Miles & Points Credit Card
This type of credit card is pretty easy to understand. United, Delta, American Airline, Marriott, Hyatt, Hilton.... all have their own loyalty program and credit card for consumers to earn reward points and frequent flyer miles. The downside about this type of credit card is that, you earn and redeem points directly with the program. Transferring points to another program is also possible; however, the transfer rate is terrible. This type of credit card is perfect for those that are loyal to a specific airline or hotel chain. In addition, you also get upgraded to a higher tier level for complimentary room upgrade, club lounge access, premium Internet, late checkout, etc. just for holding an eligible hotel credit card. Some annual fee hotel credit card even gives you a free night for just renewing that credit card by paying the annual fee to keep the card.
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Posted by: PL

Hello there! People call me PL and I am a points blogger. Obsessed with using points and miles to elevate travel experiences to explore the world. Enjoy finer things in life and good food. I have a day job, this points blog is mainly my hobby and my contribution back to the points community. If you enjoy reading this post, please help me share it! If you enjoy what you read here, please make sure you subscribe or follow this blog on social media so that you will be notified when there's a new blog's post. I thank you for reading this blog. Your support means a lot to me and it is what makes this blog's work worthwhile. If I can be of any help, you can contact me: thepointslife at gmail dot com

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